A Haaretz investigation shows the state used a controversial law to transfer East Jerusalem assets to the rightist organizations Elad and Ateret Cohanim without a tender, and at very low prices.

On October 8, David Be'eri started his car in the East Jerusalem neighborhood of Silwan and drove off. What happened next has been seen by millions of viewers and surfers: Two children threw rocks at his car. An instant later, one was thrown up onto the front windshield, while the other was pushed aside by the car's bumper. This incident further escalated the violence that has made Silwan a theater for clashes between Palestinians and settlers and police for the last year.

A view of the predominantly Arab East Jerusalem neighborhood of Silwan

Photo by: Emil Salman

The Elad organization, which Be'eri founded, has settled some 500 Jews at 15 sites in Silwan to date. Ateret Cohanim, which was founded by Mati David and specializes in gaining control of assets in the Old City in general, and the Muslim Quarter in particular, has brought 60 Jewish families to this quarter, along with hundreds of yeshiva students.

The state has transferred hundreds of assets to both groups without the requisite tender process. Each year, the state also allocates millions of shekels for security at these sites, including security cameras and fences that separate the settlers from the neighborhoods' Palestinian residents.

Information revealed here for the first time provides a glimpse of the relationship between the state and these Jewish organizations. The information was made available to leftist activist Dror Etkes by court order following a three-year legal battle.

Elad, arguing that disclosure would lead to bloodshed, fought to prevent publication of the information. The state supported this claim by furnishing cautionary opinions by security experts. But in the end, Etkes obtained a list of 11 assets relayed by the state to Elad and Ateret Cohanim, mainly from 2003-2008, without full transparency and at eyebrow-raising prices.

The state has licensed Elad to manage the historic City of David tourist site; the organization also runs archaeological excavations in the area. Since Education Minister Gideon Sa'ar decided that each school pupil should visit Jerusalem three times, the City of David has been saturated with schoolchildren. The Israel Defense Forces also sends soldiers to the site for Jewish heritage tours.

The Ir Amim nonprofit, along with a number of public figures, recently went to court to demand that Elad not be allowed to operate a national site. But for now, the City of David remains associated with Elad, and this association lends public legitimacy to Elad.

In October 2008, David Be'eri took then-Public Security Minister Avi Dichter on a tour of the City of David and described Elad's activities. Parts of a transcript of this tour, documented by one of the participants, are revealed here for the first time:

"I left the army ... and I need to purchase a home here," Be'eri, a former deputy commander of the IDF's Duvdevan undercover unit, told the public security minister. "So I take a Hezbollah man. He comes to us and buys the house for us. He buys it from an Arab and sells it to us. We finish this business and then we have a party. I see that the wife of the Hezbollah guy keeps looking at Yaki [a Duvdevan veteran who assists Be'eri]. After an hour or two she says to him: 'Tell me, weren't you the beggar who lived under our window?' Do you see what kind of world this is? ... It's very complicated ... very difficult.

"The Palestinian Authority, of course, tries to torpedo [such sales], and it has no restrictions: threats, forgery, murder - it can do anything. And we need to abide by the law."

Secrecy is essential, to protect the lives of Palestinian sellers, realtors and middlemen, Elad claims. The State Prosecutor's Office, in response to Etkes' petition, also wrote an apocalyptic warning about the possible results of disclosure.

But Judges Dan Cheshin and Noam Sohlberg recommended that the sides agree to a compromise under which the assets the state transferred to Elad and Ateret Cohanim would be disclosed with certain restrictions: The information would be incomplete, encompassing only the date when a contract was signed between the state and the Jewish organizations, the amount paid for the asset, the asset's size, its general location and whether there was a tender. The sides were forced to assent to this compromise, and Etkes received a list of 11 secret transactions between the state and these two organizations.

Five of the state's deals were with Elad and six with Ateret Cohanim. Via rentals, sales or leases, the Israel Lands Administration transferred buildings and land to the two groups. The two earliest deals, dating from the 1980s, involved truly paltry sums: For example, Ateret Cohanim paid a monthly rent of NIS 466 for a four-room apartment in the Old City.

All the Ateret Cohanim buildings are in the Old City, apparently in the Muslim Quarter. They include one large, 340-square-meter building sold to the organization in October 2006 for just NIS 912,000 and a 266-square-meter building sold in April 2008 for NIS 1.241 million. In January 2006, Elad paid NIS 433,000 to lease a one-dunam area for 49 years.

11 assets reported, only 3 identified

A Haaretz investigation has conclusively identified three of the 11 assets on the list. The first is Beit Hama'ayan. Its owner, Musa al-Abasi, is considered an absentee, so following efforts by Elad, the state appropriated the house in 1988. Three years later, Elad rented it for a monthly fee of NIS 23.73. An ILA document indicates that a 1,075-square-meter plot containing a 134-square-meter building (Beit Hama'ayan ) was leased to Elad in June 2006 for 49 years for NIS 382,000.

When Minister Dichter's group passed by Beit Hama'ayan during its October 2008 tour, Be'eri related the house's history and described his organization's methods: "We purchased two rooms, this room and the one below it, and the entrance was from the other side. I decided at the time that we would build a visitors center here. What can you do here with two rooms? Nothing. So then I said, we will break down this wall, and we tore it down.

"I went to the Antiquities Authority and said: We're renovating. There was a terrace way up there, and so [I said] we'd renovate right up to the terrace. We started to dig up to the terrace, which was up here, and at nights I would move the terrace ... until we got to where the door is, over there."

The second house identified by Haaretz was sold to the organization in July 2006 for NIS 275,000. Be'eri also told Dichter about this building during their tour. He discovered in archives that the house, known as Guzlan House and also as the Glass House, was purchased early in the 20th century with Rothschild money by the Palestine Jewish Colonization Association.

"They set Guzlan there to guard the land," Be'eri said, "and he guarded it excellently. He simply listed all the land in his own name. So then I went to the Jewish National Fund and I said: 'You're the owner.' They told me, 'get out of here.' I told them: 'I'll volunteer for the JNF; don't pay me any money, and I'll return the land to you.' And I really volunteered. I went to a lawyer and I told him, 'look, I don't have money to give you. What I have is room on my volunteer certificate where I can add your name ... To make a long story short, he agreed to volunteer, and in the name of the JNF, we sued the trespassers."

Settlers first tried to enter the house in 1991, but this attempt was foiled by media pressure. The Shamir government, which was in power at that time, was also worried about American objections. In 1998, Elad made another bid, but this also failed. Finally, in 2006, a few months before Elad received full control of the building, the Guzlan family was removed from its house.

The Guzlans subsequently filed various appeals to the courts. Among other things, they presented an effusive letter of gratitude from Jewish residents of Silwan praising members of the Guzlan family for saving Jewish lives during the 1929 riots. But one after another, the family's appeals were rejected by the courts. Today, three Jewish families live in the house.

The third identified asset is a one-dunam plot sold to Elad for NIS 262,800 in February 2005. The City of David visitors center is built on this asset. In the past, the land belonged to the Qari'in and Sabrin families, and some members of these families continue to reside in the area, living among the thousands of tourists. Like most of the assets on the list, this plot was appropriated by the state (in 1989 ) under the Absentee Property Law. Elad finally purchased the plot after 20 years of renting it from the state for a monthly fee of just NIS 41.

A committee headed by then-Justice Ministry Director General Haim Klugman was appointed by the Rabin government in 1992 to review relations between the state and nonprofit associations. It identified 68 assets relayed to such organizations by the state. The gap between the list of 11 assets made available to Etkes and the Klugman Committee's figure of 68 has two possible explanations.

First, other organizations, some of them foreign, are affiliated with Elad and Ateret Cohanim, and a number of transactions are listed in the name of these affiliates. In at least one case, in 2007, the ILA transferred an asset to the Hama'ayan organization, which is owned by Elad, but there is no mention of this property in the document whose disclosure was just authorized by the court.

Ateret Cohanim has control of no fewer than seven organizations that are not officially registered in Israel. Some of them are registered in tax shelters like the Virgin Islands and Guernsey.

In 2007, accountant Yamin Georgi conducted a thorough review of Ateret Hacohanim, relying largely on the official registry of nonprofit organizations. In his report, he wrote, "These firms have no business activity other than purchasing and holding rights to assets in Jerusalem."

The report added, "Security officials believe the disclosure of these firms could endanger them, as well as the welfare of Jewish and Arab residents of Jerusalem's Old City, and of East Jerusalem. It is thus impossible to furnish more details about them."

Lawyers who specialize in tax shelters say the Virgin Islands and Guernsey have lax corporate disclosure laws that allow companies to sell assets without revealing the identities of either seller or buyer. When a person sells an asset to a company based in such a locale, he can receive compensation in stock, and thereby bypass any requirement to record the transaction in a deed.

The second explanation for the small number of assets on the newly disclosed list is that the ILA may have violated the court order by failing to relay all the documents it was instructed to deliver. For instance, an ILA press statement issued in October 2007 revealed that a 29-dunam property in the Sheikh Jarrah area was rented to Ateret Cohanim. Yet this property is not on the list.

Tender exemptions for all

The words "exempted from tender" appear alongside each of the 11 assets. In 1992, the Knesset passed a law obligating all state agencies to hold public tenders on which any citizen may bid, though the law does allow exemptions from the tender requirement for certain defined purposes, ranging from expanding agricultural areas to promoting tourism.

But Yehiel Leket, who was JNF chairman from 1998-2006 and in that capacity a member of the ILA board, said, "I don't recall that transactions involving the sale or transfer of land in Jerusalem to the Elad or Ateret Cohanim organizations in a tender-exempt process were ever brought to the ILA board."

Another former senior ILA official added, "The ILA has general regulations on exemptions and specific regulations on exemptions, but there is also a blanket regulation that allows the conferral of an exemption in special cases that are not covered by the other regulations. This blanket regulation is applied to parties to whom there is a strong desire to give land - in some cases rightly so, and in other cases wrongly."

In its 1992 report, the Klugman Committee wondered why tenders were not held before the houses were transferred. "It appears," the report stated, "that the true reason was stated openly in the affidavit from Mr. Elihu Babai [an ILA official]: 'The political leadership decided that any asset transferred to the ILA in this particular area would be rented to Ateret Cohanim. Two people from Ateret Cohanim who worked for the ILA were engaged to identify such assets.'"

In its transactions with these organizations, the state made excessive use of the Absentee Property Law. This law, originally enacted to appropriate Palestinian property left behind by refugees in 1948, has also been applied by the state to assets in East Jerusalem. In some cases, the owners of these assets live on the West Bank, which is not under the jurisdiction of Israeli law.

"These are not people who moved to an enemy country," argued attorney Shlomo Lecker, who is currently working on a case involving this controversial application of the law that is being heard by a panel of seven Supreme Court justices. "Instead, these are cases in which we've decided to annex property without annexing the people who left it. Thus two attorneys general recommended that this law not be applied to East Jerusalem."

In its discussion of the use of the Absentee Property Law, the Klugman Committee deemed the role played by the Custodian of Absentee Property "extremely flawed." The report concluded that the custodian confiscated Palestinian houses on the basis of affidavits submitted by the two organizations, without either verifying the reliability of the people who made the affidavits or checking whether anyone was living in these house. It thus deprived any existing residents of the right to present their accounts of the properties' histories and ownership.

"I remember there were minutes of meetings held at the Housing and Construction Ministry at which Be'eri and other Elad members took part as though they belonged to the [Klugman] committee," recalled Shimon Dolan, who at that time was Jerusalem's assistant district attorney and a member of the Klugman Committee. "I asked, 'how could this be?' I'm not surprised by this list supplied by the Israel Lands Administration."

The Klugman report resulted in the two organizations' ties with the state being weakened, so they began to concentrate on acquiring property directly from Palestinians.

Then, in 2004, the Sharon government authorized the Custodian of Absentee Property to transfer assets in East Jerusalem to the Jerusalem Development Authority. About six months later, the attorney general ruled that the government had no authority to make this decision. But as the ILA list shows, assets that had been transferred to the authority during this half-year window were later handed over to the control of these two organizations.

Elad is one of Israel's wealthiest organizations. According to its 2008 financial statements, its assets totaled NIS 104 million, of which donations accounted for NIS 94 million. But the organization asked for, and received, a controversial order from the registrar of nonprofit organizations conferring confidentiality on its list of doors.

The remaining NIS 10 million came mainly from the City of David tourism site. In addition, it gets from NIS 500,000 to NIS 1 million a year from the Education Ministry.

Due to a decision made by Ariel Sharon when he was housing and construction minister in the early 1990s, security at Elad assets is funded by the Housing and Construction Ministry. The ministry hires a private security firm for this purpose. Since these assets sprawl over a wide area, this security work is complicated and expensive: In 2010, NIS 54 million was allocated to protect Jewish settlers in East Jerusalem neighborhoods.

After 24 years of settlement, the number of Jews in this area does not exceed 500 - a mere 1 percent of the area's total residents. However, Elad members insist that they control most of the land in the City of David area and constitute half the residents.

As he has on other occasions, Be'eri claimed during his tour with the Dichter that the settlers had good relations with their Palestinian neighbors. "I've lived here since the end of 1991," he said. "We went through the intifada and all that here ... I always go around with a gun, so there will be no misunderstandings. But we have succeeded with them, with the neighbors ... I have real relations of trust. Still, when I enter any house, I enter it as though it were a military operation."

The ILA commented that "as far as we know, Mr. Dror Etkes received all the information he asked for in accordance with what is stated in the [court's] ruling. If there are questions regarding the information relayed to him, he has the right to appeal to the official responsible for implementing the Freedom of Information Act at the administration."

Elad said, "The Elad organization works to strengthen Jewish bonds with Jerusalem via, among other things, settlement. The organization did and does operate in full accordance with the law. It did and does work to purchase rights to assets in Jerusalem in exchange for sums that well exceed regular market prices. In such activity, the organization (like any third-sector organization ) has to work in cooperation with various parties and agencies, and it does so in a responsible, transparent and honest way.

"Courts that have been asked to review transactions by the organization have recognized their legality and validity. Opinions submitted to the courts by the State Prosecutor's Office have stipulated that the lives of the parties involved would be at genuine risk in the event of a disclosure of information connected to transactions that involve the transfer of land rights from Arabs to Jews. And two ruling handed down by the Jerusalem District Court stressed the need to strike the right balance between the danger posed to these parties and the public's right to information.

"The organization believes that violating this balance is dangerous. It regrets the fact that various parties, which oppose its work for political reasons, chose to overlook these facts, and are not afraid to endanger others as they seek to obtain their ends and undermine Israeli sovereignty in Jerusalem."

Ateret Cohanim did not respond to this article.

Regarding the allegation that the state collaborated with the two organizations in an effort to conceal information regarding the transfer of assets, the Justice Ministry said, "The Israel Lands Administration's position, which we represented in two [court] proceedings, was formulated on the basis of security officials' view that transferring details connected to the assets could pose security risks. The plaintiffs were thus given the contracts they requested with identifying details omitted."

Regarding the confidentiality of Elad donors, the ministry said, "Elad was required by the registry of nonprofit organizations to submit the names of donors who donated more than NIS 20,000 in a year. In response, the organization submitted the names of these donors and lodged a request that it be exempted from citing these names in its financial report, partly on the grounds that such disclosure would harm the organization and its donors ... After looking into this matter, and in light of the fact that the registry did not receive any information that raised suspicions of irregularity in the donations, a decision was made to approve the organization's confidentiality request."